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Greatbatch (GB) Wins Patent Suit, Gets $35.7M in Damages

Greatbatch Inc.
(
GB
) recently won favorable verdict in a patent infringement lawsuit
against AVX Corporation and AVX Filters Corporation. A jury in the
United States District Court for the District of Delaware found AVX
Corp and AVX Filters Corp guilty of infringing two of Greatbatch's
patents. Moreover, the jury awarded $35.7 million in damages to the
company.

However, the news did not have any positive impact on share price,
which fell 1.3% to close at $39.39 on Jan 26, reflecting persistent
headwinds. Over the last one year, Greatbatch lost almost 20.2% as
compared to S&P 500's negative return of 4.9%.

In the lawsuit filed in Apr 2013, Greatbatch had accused AVX of
violating two of its patents by manufacturing and selling filtered
feedthrough assemblies used in implantable pacemakers and
cardioverter defibrillators.

Meanwhile, Greatbatch's preliminary full-year 2015 results and
full-year 2016 outlook failed to impress. The company estimates
sales decline of 8% year over year to $1.44 billion in 2015, while
sales are estimated to increase modestly to $1.47 billion in 2016.

Greatbatch unveiled better-than-expected EBITDA guidance. Adjusted
EBITDA in 2015 is expected to be $312 million, reflecting a
year-over-year increase of 1.6%. Adjusted EBITDA margin, on the
other hand, is estimated to expand 70 basis points (bps) to 21.6%.
For 2016, the company expects adjusted EBITDA at around $327
million while adjusted EBITDA margin is projected at 22.3%.

We believe increasing operating synergies and accretion from the
Lake Region buyout will drive margin expansion. The company also
expects the acquisition to drive double-digit adjusted earnings
growth in 2016. Post that, the Lake Region deal is expected to be
even more accretive.

Further, net annual synergy for operating profit is projected at
around $25 million in 2016 and is likely to increase to at least
$60 million by 2018.

Zacks Rank & Other Key Picks

Greatbatch carries a Zacks Rank #1 (Strong Buy). Exactech
EXAC
, Staar Surgical
STAA
and Vascular Solutions
VASC
are other favorably ranked stocks in the medical sector that have
the same Zacks Rank as Greatbatch.

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